The topics in the Dial-A-Law series provide only general information on legal issues within the province of Alberta. This service is provided by Calgary Legal Guidance funded in part by the Alberta Law Foundation. The purpose is to make you aware of your legal rights and responsibilities. This is not legal advice. If you require legal advice, you should contact a lawyer.
This topic will discuss student loans.
Student loans are the same as a bank loan. It is a personal debt and must be paid back according to the terms of the loan agreement. Read the terms and conditions of the loan agreement before you sign the contract.
The difference between “regular” loans and “student” loans is while you are studying at a recognized university, college, or similar educational institution, you do not have to make payments or pay interest on the loan. You must keep the Student Finance Board advised of your situation at all times. Students Finance may be reached at 780-427-2740 or toll-free at 1-800-222-6485.
Payment on the student loan begins once you complete your education or you withdraw from classes. You have 6 months after that date until you must begin paying the debt and interest on your student loan. If you cannot make the required payments on your loan, take all necessary steps to avoid defaulting on your loan or incurring further interest costs. Contact the Student Finance Board immediately and advise them that you are unemployed or cannot work due to a disability. Ask them for interest relief during the period you cannot make the payments. You may renew in 3 month stages as necessary. Renewals may be made up to 18 months maximum. During the period you get interest relief, the government pays the interest due on your loan. Monthly payments are also suspended for that period of time. Ask the Student Finance Board whether you qualify for a portion of the loan to be paid by the government. Government assistance is being gradually being phased out of the student loans program, but you may be eligible for some prior years you spent in post secondary school.
In the 6 months after the date you complete your studies or withdraw from classes, all repayment schedules should be made with the lender. If you do not make the necessary arrangements for repayment, the lender may demand full payment of the student loan immediately. The lender may also demand full payment if you default on your repayment schedule. If you are having financial difficulties contact the lender and advise them of your financial difficulties and try to arrange for new terms of payment that you are able to make. There is no penalty if you wish to make a lump sum towards the debt.
If you cannot make your loan payments, the bank will recover the loan amount from the government. The government will then collect the debt directly from you. The government can take you to Court and obtain a Court Order to collect. Collection may be a garnishment of any income or savings you have or they may seize your property. The Court Order will continue until you have paid your debt. Usually the government hires a collection agency for collection. The collection agency will begin writing, phoning or contacting you to demand payment.
Try to make some repayment schedule with the collection agency to pay your debt. If you find the collection agency is uncooperative and you believe you can pay off your debts, contact the Credit Counselling Services of Alberta. In Calgary you may call 403-265-2201 or in Edmonton 780-423-5265 or toll-free in Alberta 1-888-294-0076. Debt counsellors will assist you in exploring your options to deal with your debt. For example, arrangements can be made to pay back your loan through the Orderly Payment of Debts program. This is a legislated consumer repayment program. The program will identify all your debts and living expenses and assist you in developing a monthly repayment schedule. A request for a Consolidation Order of your debts is made from the Court. Your creditors are notified and they have 30 days to object the Order. Once the Order is approved, you make monthly payments to the Credit Counselling Services of Alberta who distributes the payments to the creditors. You would be protected from certain legal actions like garnishees. You payment schedules are based on your ability to pay and your interest rate is fixed.
If you declare bankruptcy, you must wait 10 years before the student loan can be discharged by bankruptcy proceedings. The exception is where you acted in good faith and are able to show the Court that you will continue to have financial difficulty in repaying the student loan.